Investigating of effect herding behavior types among analysts on stock price by network analysis in Tehran Stock Exchange

Subject Areas : Journal of Investment Knowledge

Zahra Shirazian ¹

1 - Assistant Professor and Faculty Member, Department of Management, Malayer Branch, Islamic Azad University, Malayer, Iran

Received: 2017-07-11 Accepted : 2017-10-21 Published : 2019-06-22

Keywords: herding behavior, Undirected weighted network, Weighted clustering coefficien, analysts,

Abstract :

Herding behavior among security analysts is described as similar behavior by analysts when forecasting main finance ratios of public companies and when giving investment recommendations. This type of behavior can be divided into two categories based on the different driving forces behind the analysts’ herding behavior.. For instance, if one analyst lacks the ability to research and provide recommendations, he or she  may follow, or even copy, a famous analyst’s reports. Such  action will result in herding behaviorIn this  paper, we  build  undirected weighted networks to study herding behavior among analysts and  to analyze the characteristics and  the  structure of these networks. We then construct a new  indicator based on the  average degree of nodes and the  average weighted clustering coefficient to research the various types of herding behavior. Our findings suggest  that every industry has, to a certain degree, herding behavior among analysts. Furthermore, we relate the  two  types of herding behavior to stock  price  and find that uninformed herding behavior has a positive effect  on market prices, whereas informed herding behavior has a negative effect.  

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